A finance minister boasted of a 4.2% GDP increase at a recent economic meeting. Outside the venue, commuters waited for delayed buses and nurses contemplated leaving due to burnout, while the room buzzed with approval. It was a very familiar disconnect.
For a long time, GDP has been thought of as the economy’s pulse; if it is increasing, everything must be good. Prosperity, however, has a more complex rhythm. It flows through livable homes, fulfilling employment, clean air, and family time. None of those are guaranteed by a robust GDP.
| Category | GDP Growth Highlights | What It Misses About Prosperity |
|---|---|---|
| Primary Focus | Measures output and transactions | Measures wellbeing, equity, and environmental balance |
| Counts as Progress | All economic activity—even rebuilding disasters | Only meaningful improvements in living standards |
| Distribution Awareness | Ignores who gains or loses | Considers income spread, access, and equity |
| Environmental Impact | Ignores depletion and pollution | Factors in sustainability and future impact |
| Social Contributions | Ignores unpaid care work and volunteering | Includes invisible yet vital contributions |
| Real-Life Experience | May rise while most people feel worse off | Tracks actual quality of life across demographics |
| Alternative Indicators | GDP per capita, inflation-adjusted growth | GPI, HDI, Comprehensive Wealth frameworks |
| Common Misuse in Policy | Used to justify harmful or unequal growth | Encourages policy centered on wellbeing |
In many nations, GDP and productivity have increased throughout the last 20 years. However, middle- and lower-class workers’ real salaries have hardly changed. Today, economists call this the “Great Decoupling.” Payrolls do not increase as productivity does. Though not in a way that most people can sense, the system is expanding.
The delusion is more profound. Everything that includes spending is included in GDP. The GDP increases when a hurricane destroys homes and insurance payouts pay for rebuilding. GDP increases once more when respiratory illnesses brought on by air pollution flood hospitals. Distress and destruction are recorded as advancements.
It is astounding that unpaid caregiving, which benefits both individuals and the larger society, is not included in GDP at all. Volunteering and community organizing don’t either. Despite being economically invisible, their efforts are crucial. What GDP cannot price, it does not see.
I talked to a cab driver in Manila a few years back while doing research on wealth inequality in Southeast Asia. The economy of his city has been steadily expanding for years. In contrast, his account depicted fewer meals shared at home, higher rent, and longer hours. Like many others, his life had not significantly improved.
Design is the issue, not simply data. Human well-being was never intended to be measured by GDP. The idea’s formalization in the 1930s was aided by Simon Kuznets, who specifically cautioned against using it as a stand-in for welfare. Policymakers, however, started to treat it as such over time.
Some nations are changing course. In addition to typical economic metrics, New Zealand’s “wellbeing budget” places a higher priority on child welfare and mental health. Even if it goes against political convention, it’s a strategy that is more in line with what people genuinely value.
Alternative actions are starting to appear. For instance, the Genuine Progress Indicator (GPI) modifies GDP by adding social contributions and deducting environmental harm. The Human Development Index (HDI) rates countries according on their income, health, and educational attainment. Both make an effort to represent real experience rather than merely financial results.
GDP’s simplicity is what makes it appealing. One figure, understood by all. “Up” denotes excellent. Down indicates trouble. However, that simplicity is also its biggest drawback. It eliminates subtleties. What can be sold is prioritized over what can be maintained.
Technology makes this much more difficult. Although they may improve lives, many digital breakthroughs lower costs or replace paid services, which lowers GDP. Travel agencies used to be involved in internet travel booking. Although it is now free, GDP shows lower economic activity rather than increased convenience.
GDP does not differentiate between detrimental churn and productive growth since it treats all expenditure equally. An investment of $1 billion in clean water is equivalent to $1 billion in flood damage restoration due to deforestation. The background is gone.
The goal of incredibly flexible measurements like comprehensive wealth is to close this disparity. They monitor net assets, human capital, natural resources, and produced capital. Although their acceptance is still developing, these frameworks present a more impartial viewpoint.
Last year, when I visited Helsinki, I noticed a tiny public park encircled by brand-new residences. After years of advocacy, locals informed me that the green space had been preserved. For the families who gathered there, it meant everything, even though it wasn’t included in GDP. That seemed like affluence to me.
We require an economic narrative that acknowledges this complexity. One in which living a meaningful life is more important than simply producing a lot.
Clinging to GDP alone may prove dangerously shortsighted in the years to come as demographic changes, digital upheaval, and climate concerns transform our priorities. Not only is a wider perspective desirable, but it is also required.
We go from pursuing growth for its own sake to creating lifestyles that people genuinely want to live when we move toward policies that prioritize equity, sustainability, and well-being.
It’s not about giving up on GDP. The goal is to improve the overall image so that we can confidently state that we are all expanding together with the economy.
